May 12, 2025 – Over the weekend, the U.S. and China reached a trade deal with each side agreeing to reduce tariffs by 115% over the next 90 days. The major breakthrough is a great start, but trade uncertainty remains, and negotiations will need to take place in the next three months to work out a more detailed agreement. With the U.S. engaging in trade talks with many of its trading partners, the Fed decided in the latest May meeting to hold interest rates unchanged until more data is available. Consumers, meanwhile, remained concerned about the ongoing economic uncertainties and their homebuying sentiment continued to be subdued. 

Tariffs on imports from China put on pause: The U.S. and China agreed to de-escalate trade war after a two-day discussion in Geneva, Switzerland. Both sides will temporarily suspend most of the tariffs they had imposed on each other since early April, with the U.S. slashing total tariffs on Chinese imports to 30% for 90 days, while China will lower its levies on U.S. products to 10% from 125% for the same time frame. China also said that it will either cancel or suspend some nontariff trade measures it had imposed, potentially including easing restrictions on exporting minerals used in batteries and other high-tech applications. The tariff pause will give more time for the trade negotiation to continue and hopefully reach a more detailed agreement. The trade breakthrough jumpstarted the stock market on Monday, with the S&P 500 ending the day with an increase of 3.26%, while the dollar value also strengthened with the ICE U.S. Dollar Index climbing 1.45%. Mortgage rates, on the other hand, jumped to a two-week high as bond yields soared in the hope that a recession will be avoided. 

The Federal Reserve continues to hold interest rates unchanged: At the conclusion of its May meeting, the Federal Reserve kept the benchmark interest rate unchanged in a range between 4.25% - 4.50%. With the tariff impact remaining a concern while the economy still showing some signs of resilience, the Federal Open Market Committee continued to be patient and decided to wait for more data before making a move on rate cuts. Fed Chair Jerome Powell said that the risks of higher inflation and unemployment had risen but also noted that the ongoing trade talks between the administration and a number of important trading partners have “the potential to change the picture materially - or not.” As such, the central bank believes it is appropriate to wait and see how things evolve before making any adjustment to its monetary policy. Financial markets, in general, reacted positively to the Fed’s decision, with stock prices ending higher and rates dipping slightly on the day of the announcement.   

California housing affordability inched up in the first quarter: Housing affordability in California improved in the first quarter of 2025, with the statewide index for existing single-family homes rising two points from Q424 to 17% and remaining unchanged from its year-ago level. Despite slower growth in Q125, the statewide median home price stayed elevated and continued to increase at a moderate pace from a year ago. Mortgage rates, meanwhile, rose to the highest level in three quarters amid growing economic uncertainties, and kept borrowing costs near their all-time highs. The monthly mortgage payment for a median-priced home (including taxes and insurance) slipped 1.8% from Q424 but jumped 4.6% from Q124, as the effective mortgage rate rose from both the previous quarter and the same quarter of last year. Over the next quarter or two, rates could continue to fluctuate as the impact of trade policies remains unclear.   

Housing sentiment bounces back after reaching 15-month low: Home Purchase Sentiment released by Fannie Mae inched up in April after falling to the lowest level since December 2023 in the prior month. The slight tick-up of 1.1 points to 69.2 last month was the first monthly increase in three months for the index, but it remained 2.7 points lower than the level reached at same time last year. Sentiment on buying and selling moved in opposite directions last month, as consumers who believed now is a good time to buy inched up to 23% from 22% in the prior month, while those who believed now is a good time to sell fell six points to 58% - the lowest level in 16 months. Respondents remained concerned about the economic uncertainties and mortgage fluctuations brought on by the tariffs, as the share who said that mortgage rates will go up in the next 12 months climbed to 36% in April, the highest level since November 2023. Those who expected their personal financial situation to get worse over the next 12 months jumped again and soared to the highest level (31%) since June 2022. On a brighter note, consumers were less pessimistic about the labor market, as those who were concerned about losing their job in the next 12 months dipped to 25% in April from 32% in March. With recession odds remaining high and mortgage rates not expected to come down quickly in the next few weeks, housing sentiment will continue to be subdued for the rest of the second quarter.

Staging makes a difference in real estate transactions: Almost three out of ten (29%) real estate agents reported that staging led to a 1% to 10% increase in the dollar value offer, and nearly half of the agents who represented sellers said that staging reduced the time homes spent on the market, according to the National Association of Realtors® 2025 Profile of Home Staging. The study highlights the importance of staging in real estate transactions, as eight out of ten (83%) buyers’ agents agreed that staging a home made it easier for buyers to envision the property as their future home. Staging the living room (37%) was considered the most important for buyers, but many of them also wanted to see a staged primary room (34%) or a staged kitchen (23%).

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